Logistics

‘It makes sense for SpiceJet to lease Airbus aircraft’

Ashwini Phadnis New Delhi | Updated on January 24, 2018 Published on July 26, 2015

sanjiv-kapoor



Soon after SpiceJet inducted two Airbus aircraft into its fleet, the BusinessLine met with the airline’s Chief Operating Officer Sanjiv Kapoor to understand the reason behind the airline leasing aircraft which were different from those that it has in its fleet. Edited excerpts.

Why the decision to have a three-aircraft fleet after criticising such a move earlier?

We still have a two-aircraft type fleet, Boeing 737s and Q400s. The Airbus A319s are here on short-term wet lease only, and are operated for us by the lessor. This decision is driven by demand and supply. With fuel prices lower and demand for air travel picking up, it makes sense to operate more flights to make up for some of the capacity we lost during the crisis.

For wet leases what matters most is aircraft availability, not type of aircraft, as the lessor is responsible for operating the aircraft. We have got in two Airbus A-319 on a short-term wet lease to meet the growing passenger demand. The aircraft have been taken on short-term lease of up to a maximum of six months.

But doesn’t doing a wet lease of an aircraft which involves getting in crew with the aircraft increase the costs for an airline?

Actually, it does not. Since it is wet lease we pay a fixed amount every month and the lessor operates and maintains the aircraft. Probably, the best way to explain this will be to give an example of a taxi. You ride a taxi and pay what the meter shows, you do not particularly care whether it is a Hyundai or a Maruti. This is the same with a wet lease. SpiceJet has leased the Airbus 319 and pays a fixed amount which has been pre-decided. The lessor takes care of the rest. Now with these aircraft in the fleet, we are able to operate more flights and earn revenues which help the bottomline. This also allows us to observe the Airbus aircraft up close and personal, which is not a bad thing.

But adding a new aircraft type means additional costs for the airline for it has to keep spares and do its maintenance etc...

No. Here the cost of crew, personnel, maintenance and spares, and even insurance is with the company with which we have entered into a wet lease agreement.

With oil prices down and passenger demand for travel increasing the wet lease solution to meet immediate capacity needs makes perfect sense.

Are you looking to lease more aircraft?

We are sticking to the target of having a fleet of 26 mainline jet aircraft by the end of the year, plus our 14 Q400s. Currently, we have 20 mainline jets, including the two aircraft, which have been got on wet lease, along with the 14 Q400s.

Competitors complain that by discounting your fares you are spoiling the market. How do you view this and explain continuing your discounting given the financial mess the airline was in last time?

Let us be clear the problems faced earlier were due to certain structural and legacy issues, and had nothing to do with the discounting we did in 2014. In fact, our demand stimulation strategy helped us reduce losses year-on-year by almost 50 per cent last year, while fuel prices were still high. What we have seen is that whenever we provide an intelligent stimulus to the market passenger load or the number of people we carry goes up. If you carry 100 passengers at a fare of say ₹2,000, what we have seen is that when the fare was decreased to say ₹1,500 the number of passengers flown shot up to 200 passengers. It is simple mathematics. We are maximising revenues and minimising wastage of seats, which are the ultimate perishable commodity, through well-thought out discounting and promotions. As for our competitors, they have seen how it works too. Which is why while we stopped our advance purchase promos during our crisis in November 2014-January this year until our future was assured, others continued with it! It makes sense for no one to fly empty seats.

Published on July 26, 2015
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